PwC And Alliance Partners – Staying Close To Home

Update:Sequoia Capital, which invests in Logical Apps, is an external audit and tax client of PwC.

SEC/PCAOB – Isn’t it against the Independence rules for PwC to be making splashy announcements of alliances with companies that are significant investments of their audit clients?

**********************************************************************************When I was with PwC, I was on a team called “PwC the Client” that performed internal audits of the Firm itself. Far from being “your father’s internal audit” team, one that did reviews of only travel and entertainment expenses, we actually attempted to do real operational and compliance audits.

Unfortunately, without saying too much out of respect for my former colleagues and the requirements of confidentiality, I have to say we didn’t go as far as I had hoped we would. It’s tough to establish a real internal audit process (one like we recommend to our clients) in a Big 4 firm, a partnership, since the targets are other auditors. In particular, it’s tough to have Big 4 partners as your “Client,” guys who often have a sense of insularity, entitlement and lack of perspective that causes them reject criticism, especially from anyone who isn’t a “lifer”.

One area that requires greater scrutiny by all of the Firms’ internal audit and compliance functions is business alliances. This issue is a landmine for any of the audit firms. E&Y lost the privilege of taking on new clients for six months because of their lack of care over who and how they aligned with PeopleSoft, were cited for a foreign affiliate that was too close to BAAN, and lost an important client in American Express related to this issue.

The bottom line is that, in my opinion, the Big 4 develop alliances, an otherwise powerful marketing and service delivery tool for consultants like a bunch of…

b. Review of Independence PoliciesThe objectives of the inspection procedures in this area included evaluating …Firm participation in business ventures, alliances, and arrangements; …To accomplish these objectives, the inspection team reviewed the Firm’s policies, procedures, guidance, and training materials pertaining to these independence matters. The inspection team also ..reviewed information concerning the Firm’s existing business ventures, alliances, and arrangements, as well as the Firm’s process for establishing such enterprises. The inspection team also interviewed numerous National Office and practice office personnel regarding the Firm’s independence policies, practices, and procedures…At the practice offices, the inspection team selected a sample from the engagements it reviewed …to determine whether the Firm was involved in any business ventures, alliances, or arrangements with the issuer…

In my opinion, more and more scrutiny of this issue from regulators is coming and should come, over and above the independence issues, as the PCAOB becomes familiar with each firm’s systems, (or lack thereof,) organization, and players. The firms will have to be constantly vigilant of new “consulting” directors and direct-entry partners who don’t come from an audit firm pedigree and don’t give a flying tomato about independence nor understand the necessity of it for an audit firm.

Because that’s what these firms are, AUDIT FIRMS, regardless of all the other far flung services they provide. Having a PCAOB imprimatur to provide audits for US public companies means they have to follow the laws and regulations and PCAOB/SEC rules and make sure their myriad of associates, alliance partners and foreign offices follow those rules too. It’s not an easy job given the lack of “consulting firm” experience of most of their current audit partners (with the exception of Deloitte, to their credit) and the dearth of reliable systems and effective corporate governance to control partners both in the US and abroad.

PwC and LogicalApps will provide solutions for the continuous monitoring of financial transactions with preventative and detective controls via LogicalApps software applications. This will help enterprises ensure that established business processes and policies are being enforced, alert management in real time of any deviations and hopefully improve the efficiency of the financial organization.”

These new technology companies spring up like weeds sometimes, but it’s no mystery how a new, small company gets a big alliance relationship with a firm like PwC.

Chris Capdevila – SVP, Strategy and Corporate Development“Chris Capdevila, founding CEO of LogicalApps, guides the company’s strategic direction and key corporate initiatives. Since its inception in 2000, Chris has established a company culture based on integrity, reliability and excellence in all pursuits…Chris has more than 15 years of experience in the enterprise software space…Prior to founding LogicalApps, Chris was a senior consultant at Price Waterhouse LLC, and was instrumental in delivering critical process improvements during the implementation of business applications at Western Digital, Disney, General Electric, Eaton Corporation and Iomega…”

A Senior Consultant! That means when he left, he had probably 3-5 years of experience and now he has only fifteen total. He must also have a “sponsor” within PwC.

“Marie Leippe is the Controller at Sequoia Capital. Marie is primarily responsible for the financial accounting and reporting for the firm’s limited partnerships, general partnerships and its service company. Prior to joining Sequoia in 2001, Marie worked for PricewaterhouseCoopers in the Assurance and Business Advisory Services Group, specializing in high-tech start-ups and venture capital partnerships…”

Jim Zierick – CEO“As chief executive officer, Jim Zierick sets the overall strategic direction for LogicalApps. Jim Zierick has spent twenty five years in executive management roles in the technology field. Most recently he was Executive Vice President of Worldwide Field Operations for Peregrine Systems where he held diverse management roles in strategy, sales, marketing and operations, most recently leading a 350 person sales alliance, customer support and professional services organization. He was also responsible for generating $200 million of new license, support and service revenue. While at Peregrine he led a transformation of global field operations to better serve large enterprise customers resulting in above industry average growth in license revenues, and maintenance attach rates. Jim’s contributions to Peregrine were instrumental in doubling the value of the company post-bankruptcy and its ultimate sale to Hewlett-Packard for $425M…”

Tom Tobin – SVP, Product Development“As Senior Vice President of Product Development, Tom is responsible for leading the product development and engineering teams, setting the overall vision and strategy for product development, and managing the software development lifecycle. Tom brings more than 18 years of experience in software product development holding leadership roles at Peregrine Systems, Fair Isaac Corporation, and HNC Software. As vice president of product development at Peregrine Systems, Tom managed the product development organization comprised of more than 150 developers. He redefined the company’s technology direction and streamlined Peregrine’s product development lifecycle as the company was emerging from bankruptcy. In that role, Tobin provided the vision and guidance in the development of an innovative new product that leverages analytics and decision technology to better govern IT business services…”

Carla Fitzgerald – SVP, Marketing“Carla Fitzgerald is responsible for the overall marketing effort at LogicalApps, including product launch, lead generation, branding and corporate communications…Previously…Carla also spent 10 years at Computer Associates Int’l where she held leadership positions in marketing, strategic alliances, product management, and the pre-sales technical organization. As VP of marketing at CA, Carla launched the enterprise version of their flagship product, Unicenter, which sold over $100 million in its first year…”

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[…] I know how delays can be tactics rather than just poor follow-through. I was a member of the “PwC the Client” internal audit team in 2005-2006. In retrospect, I realize that some of the frustrating delays in […]

[…] I know how delays can be tactics rather than just poor follow-through. I was a member of the “PwC the Client” internal audit team in 2005-2006. In retrospect, I realize that some of the frustrating delays in […]

[…] as I have mentioned before, what we were able to do during my tenure was much less than I had expected, partially due to the fact that the team was fairly new in its latest incarnation and so had not […]

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Francine McKenna (@retheauditors) is the Transparency Reporter at MarketWatch.com, a Dow Jones publication, where her work is also featured frequently in the Wall Street Journal. McKenna had more than twenty-five years of experience in consulting and professional services including tenure at two Big 4 firms, both in the US and abroad before becoming a journalist. Look for her prior columns, "Accounting Watchdog" at Forbes.com and "Accountable" at American Banker. For more information, click "About" at the bottom of this page. For more information contact Francine McKenna, fmckenna@mckennapartners.com